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The UK's Office for National Statistics surprised the pensions industry this morning by deciding to leave a key inflation metric, RPI, unchanged after a three-month review - and the gilts and swaps markets shifted as widely held expectations of a change were unwound.

The ONS had suggested altering the Retail Prices Index to bring it closer into line with another measure, the Consumer Prices Index, which has consistently reported inflation figures between 0.5 and 1 percentage point a year lower.

But this morning, Jil Matheson, director of the agency, said: "There is significant value to users in maintaining the continuity of the existing RPI’s long time series without major change, so that it may continue to be used for long-term indexation and for index-linked gilts and bonds in accordance with user expectations."

The ONS will publish a new index, RPIJ, from March which takes into account its suggested changes, but it will be supplementary to RPI, instead of replacing it. Its full statement this morning is available here: http://bit.ly/UAHVUe.

David Rae, head of investment solutions in Europe at Russell Investments, said: "This morning's announcement by Jil Matheson to leave the RPI calculation methodology unchanged is somewhat surprising. The market had been expecting a change."

Mark Davies, a managing director at investment consultancy P-Solve, said: "The shift in the market has already happened. Even before the market opened there were some prices that were being quoted 20 basis points higher. And straightaway as the market did open, 30-year RPI inflation swaps jumped by 30 basis points, from 3.3% per annum to 3.6% per annum, within minutes."

P-Solve's parent company, the actuarial consultancy Punter Southall, has been advising pension fund clients to assume that a 0.5% fall in RPI inflation had already been "priced in" - suggesting a no-change decision would adjust predicted future RPI upward again by 0.5 points.

As a result of this, some companies might even see their pension deficit rise slightly; the effect will depend on their holdings of index-linked gilts and other assets.

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Punter Southall gave a simplified example; if a £300m fund held 75% of its money in index-linked gilts and 25% in equities, and had a £60m deficit, that deficit might rise to £64m thanks to the adjustment of expected RPI back upward.

Nevertheless today's decision will please most of the pensions and fund management industry. The ONS said 332 of the 406 responses it received to its consultation had argued for no change, and observed: "The large majority of responses did not address methodological issues but identified the impact that the changes implied… would have for them.

"These were primarily in terms of the anticipated yield on investments such as ... index-linked gilts and the value of pension income."

Axa Investment Managers was one firm to say earlier this week it would prefer the status quo, with David Dyer, senior portfolio manager, arguing: "RPI is a very long-standing index and one that has been used by many parties in striking long-term financial contracts over the years."

However, Crispin Lace, director, consulting and advisory services at Russell Investments, said: "Those who were deferring any further inflation hedging until after the announcement may feel that they have missed out on an opportunity to hedge while linkers were 'cheap'. However, we caution against any precipitous action as markets may well settle down over the next few weeks, as the longer term impact becomes clearer."